Where are the Construction Workers?

The reported lack of construction workers is one of the more interesting developments in recent years. At first blush this seems implausible. The U.S. is still more than a million construction jobs below the housing boom peak, or about 14%. (Oregon is about 20,000 jobs or 18% below.) However, the National Association of Home Builders, and Associated General Contractors, along with our local home builders and industry contacts, all point toward lack of labor as an issue. As Conor Sen notes, the sector’s unemployment rate is all the way back down. This is driving up costs/wages and lengthening completion times.

These trends, and the following exchange last week brought to mind some work I’ve had on the back burner.

If lack of labor is an issue, what’s missing today relative to last decade? One way to look at that question is to see how the distribution of construction jobs has shifted by age. Clearly the country’s aging demographics can be seen over the past 9 years, and the fact that younger/less experienced/less skilled workers felt the brunt of the Great Recession job losses.

Here in Oregon, the same general pattern is clear in the data. Below I plot the number of workers instead of the distribution, to better gauge the levels. Construction jobs for those 34 years and younger remain 36 percent below 2007 levels, while middle-age jobs are 16 percent lower. However, construction employment for those 55 years and older is up 17 percent. And these trends are in a state that is underbuilding housing relative to population growth.

So what’s different today? By slicing the data by age, it’s clear that there are not nearly as many young workers in the industry. That’s both good and bad news. It’s good because peak Millennial is 25 years old today. There are a lot of young people, and will continue to enter their prime working ages over the coming 5-10 years.

It’s potentially bad news in that fewer young folks are entering and finishing apprenticeships. Even as the number of postsecondary graduates is rising in Oregon, apprenticeships are flat, and thus a declining share relative to the overall growing population. I do not know why this is happening, exactly, and overall it is not encouraging moving forward with an aging workforce. Industry contacts and our adivsors have noted that societal forces are pushing younger individuals away from traditional blue collar occupations (construction, manufacturing, transportation, etc). Of course given trends over the past 40 years, this is not entirely unreasonable. But it may be possible to overdo the effect.

The issue here is that construction, nonresidential in particular, have median wages that are on par with teachers and community service workers, even as formal education requirements could not be more different. The reason is they are all skilled workers, but some learned on the job and some in the classroom on a college campus. Among occupations that do not require college degrees, construction, and installation, maintenance and repair workers have the highest wages, some 16 percent above the national median for all jobs. Given the aging workforce, and the fact that many of the construction, and installation, maintenance and repair jobs cannot be automated or offshored, the economy needs more of these workers moving forward.

Responses

I believe the reduction of union membership is contributing to the age shift. The unions provided retirement plans which allowed the older workers to survive financially. Construction work takes a toll on the body and many older workers would retire if they had insurance and retirement plans. Another factor is the reduction of wages, adjusted for inflation, in the construction industry. I say this as the son and brother of construction workers who despises unions in principal but sees the necessity in some industries.

Josh – Research Into Action worked with LBNL in 2008-2009 to conduct a study on the energy efficiency services industry, which is a component of the construction industry. Relevant to your musings as to why younger people are not entering construction, trade associations we spoke with around the country noted several factors as to why younger people were not entering the construction trades and older workers were trying to retire. the reasons we often heard were that 1) younger workers were difficult to recruit into apprenticeships because they were being attracted to less physical jobs and 2) the drug and alcohol requirements of many construction programs were difficult to meet. If you would be interested in the report the link is attached. It is long however.

Thanks Jane; appreciate the comments and the link. The research looks interesting. I know it touches on Oregon specifically in there, and have read additional work on energy efficiency and the construction industry here in our state and in the PNW.